BLBG: Natural Gas Falls as Report Expected to Show Supply Glut Swells
Natural gas futures fell for a second day speculation a government report tomorrow will show an above- average stockpile increase as the recession restricts demand for the industrial fuel.
The Energy Department will probably say inventories gained 117 billion cubic feet in the week ended May 29, according to the median of nine analyst estimates compiled by Bloomberg. The five-year average change is an increase of 94 billion. Supplies in last week’s report were 22 percent above normal.
“I expect tomorrow’s number to be more of the same,” said Stephen Schork, president of the Schork Group Inc. of Villanova, Pennsylvania. “Given we have so much extra supply, anything short of a really low injection will be bearish.”
Natural gas for July delivery dropped 12 cents, or 2.9 percent, to $4 per million British thermal units at 9:21 a.m. on the New York Mercantile Exchange. Futures have dropped 29 percent this year.
Industrial gas use may tumble 8 percent this year because of the recession, the Energy Department said on May 12. Overall U.S. consumption will probably contract 1.9 percent. Factories and power plants account for about 58 percent of U.S. gas demand.
“Commercial and industrial demand is essentially dead,” Schork said. “GM is dead. That’s 450 million square feet of factory space that doesn’t need gas anymore. That’s going to be quite a shock.”
Fewer Jobs
Companies in the U.S. cut about 532,000 workers from payrolls in May, according to a report from ADP Employer Services. April’s reading was revised to show a reduction of 545,000 workers, up from a previous estimate of 491,000.
“In the U.S. and Canada you have empty storefronts,” Schork said. “An empty storefront is a storefront that doesn’t use electricity or natural gas.”
A stronger dollar sent crude oil and other commodities lower, pulling gas down as well, said Martin King, an analyst at Calgary-based brokerage FirstEnergy Capital Corp. A stronger dollar limits investors’ need to hedge against inflation.
“It’s just kind of broader weakness in the commodities complex, spillover effects from the selling of crude and the stronger dollar,” King said. “Just in general, the fundamentals have remained terrible. Plus the technicals don’t look all that great either.”
The dollar strengthened 0.7 percent to $1.4210 per euro at 8:20 a.m. in New York, from $1.4303 yesterday, after earlier gaining 0.8 percent to $1.4177 in the biggest intraday advance since May 27.
Crude oil for July delivery slid 64 cents, or 0.9 percent, to $67.91 a barrel in New York. The futures have gained 52 percent so far this year.
